The state has given its blessing to Yale-New Haven Hospital's $160 million acquisition of its cross-town rival.

The state Office of Health Care Access (OHCA) approved Yale-New Haven's purchase of St. Raphael's Hospital on Wednesday, saying the combination will serve the public interest by ensuring St. Raphael's won't go insolvent.

The 500-bed hospital has been facing financial losses for years, and the merger allows for service integration and cost savings that will make it more financially sound, OHCA concluded.

The deal, however, will lead to about 200 layoffs including the loss of management positions, a Yale-New Haven Hospital spokesman said. Those employees who will lose their job have already been notified.

Last month, Connecticut Attorney General George Jepsen said that his office wouldn't seek to block the deal under the state's antitrust law.

Jepsen's office and the Federal Trade Commission investigated whether the merger would substantially lessen competition for medical services in the Greater New Haven area.

"Based on the evidence developed during the investigation, and in light of the law applicable to these types of transactions - including taking into consideration St. Raphael's precarious financial condition and other expected efficiencies that will be realized through the acquisition - I have decided not to seek to block the merger under Connecticut's antitrust law," Jepsen said in a press release.

Yale agreed to Jepsen's request to maintain current levels of charitable healthcare and financial assistance, and provide the same level of service and assistance to patients receiving care on the St. Raphael's campus.

The deal will also provide Yale-New Haven, which is having capacity issues at its campus, with more capacity to move patients.